It is very possible to make your credit work for you instead of against you. You just need to be aware of what both current and future creditors look for in regards to your credit history . They can do this by looking at your credit report.
In modern times, it’s almost impossible to imagine life without a credit card, never mind if you have kids; then you need at least 5! Anyhow, there are a few tricks of the trade to help you get the most out of every aspect of your credit cards:
- Find a card with rewards that you like, want, or need. If you have a credit card with a median interest rate (13% -16%) with rewards within an airline’s frequent flyer miles, that’s a relatively fair program. But if you have a phobia of flying and refuse to get onto a plane, this really doesn’t make much sense. Cards with rewards tend to have higher interest rates than those without such a benefit. So be sure to weigh out the options before accepting such a card.
- Pay off your bill every month. By not purchasing items that you can’t afford (with the exception of an emergency, like your car needing tires or something), you should really try to pay off your balance each billing cycle. Not only will you save fees and interest charges, but if your card comes with rewards, you’ll be getting them for “free”!
- Don’t buy more than you can afford. This one is relatively old news, but it’s still worthy advice; even when it comes to the smallest, most inexpensive item that you need to purchase, like deodorant. You have no cash, but you need it, so you decide to put it on your credit card ( everyone will be happy that you did, trust me on this). If you normally buy a brand that is $2.00, don’t buy a brand that is $4.00 just because you aren’t paying cash for it. If it turns out that you can’t pay the balance in full at the end of the month, you’ll be paying interest on your deodorant purchase, and that’s worse than sitting on a bus next to someone who has run out of the subject at hand.
- Make your payments on time. Common sense tells us this, but if you don’t pay your bills on time, you will have late charges assessed to your balance. If your balance is close to the limit, the new late charge could easily send your balance over the limit, causing over-limit fees on top of late fees. This could easily cost you at least $75, so be sure to pay your bill on time.
- Never carry a balance of more than half of the credit limit. This particular trait of good credit is not publicized very much by the credit card companies, as they make their money on the interest that you pay them. They want you to rack up your bill so that you will not be able to pay the balance in full, so that you will have to pay interest on your account. The 50% mark is the maximum for the perfect credit score, the optimum is only 30%. For example, if your credit card limit is $1,000, ideally your balance will never exceed $300.
Of course, life happens. Situations arise and unexpected bills pop up, making it nearly impossible to keep on a credit card schedule with a tight budget. If a problem comes up and you are unable to pay, you should make every effort to call your creditors; you’ll be surprisingly pleased at how helpful and understanding they can be.
